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Contract Rescission

20/12/16 What Does Contract Rescission Mean?

Contract Rescission

Contract rescission refers to the cancellation, undoing, or “unmaking” of a contract between parties. It is sometimes called “cancellation” or “overturning”.  The purpose of contract rescission is to restore the parties to their original position before the contract was made.
Contracts must be rescinded entirely; that is, the entire contract must be cancelled, not just one part. Rescission is often available as a remedy in cases where there are issues with the way that the contract was formed.

Contract rescission is available when there is an issue with contract formation. Common formation defects include:

Fraud: The false representation may related either to the contract’s subject matter or to matters related to the contract
Lack of capacity: one of the parties lacks to the capacity to negotiate an agreement due to illness, mental incompetence, intoxication, or being underage (under 18 years old)
Coercion/Duress/Undue Influence: A party cannot be forced to sign a contract under threats of harm or under hostile conditions.
Mistake: Both parties must clearly understand all the terms in the contract.
Consideration has failed, is inadequate, or is illegal.
Against public interest: A contract may be rescinded if performing it would be against the general consent of the public (for example, a contract requiring one of the parties to be subjected to indentured servitude).


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